British Energy sells Bruce in cut-price deal

British Energy is within days of announcing the sale of its Canadian operation, Bruce Power, to a group of three local businesses for £300m.

The deal should be finalised this week and will give the troubled nuclear generator breathing space while it negotiates with creditors, owed £1.9bn, in an attempt to avoid going into administration.

The sale price is about £200m less than City analysts believe British Energy's 82 per cent stake is worth. The purchaser is a consortium of Cameco, the Saskatchewan-based uranium group, which already owns 15 per cent of Bruce, TransCanada Pipelines and investment group Borealis Capital.

The disposal was given extra urgency last week when the Canadian Nuclear Safety Commission refused to sanction the planned restart of two of Bruce's nuclear reactors until the question of Bruce's ownership could be resolved. A sale will allow British Energy to pay back a large part of the £650m emergency loan extended by the Government earlier this year when British Energy faced administration.

The loan, twice extended, is due to be paid back in early March. The Government lent the money on condition that the company sold Bruce, was well on its way to selling its US business AmerGen, and agreed a financial restructuring with its creditors.

Last week the full extent of British Energy's financial problems were revealed when it unveiled a £337m pre-tax loss for the six months to the end of September. Adrian Montague, the former City banker who last month replaced Robin Jeffrey as chairman, warned that the group could still go into administration.

Even if the restructuring goes through, this may not end British Energy's woes. Finance director Keith Lough has warned that the nuclear group may have to write down the value of its UK reactors, plunging it into further losses.

The group's future is dependent on two different groups: bondholders owed more than £400m and trade creditors owed £365m. Both have asked investment banks to assess whether it is worth backing a restructuring.

The Bruce sale is expected to lead to Duncan Hawthorne, Bruce's chief executive, returning to the UK where he will be a strong candidate to be British Energy's new chief executive. He is seen as the leading internal candidate.